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Alaska gas pipeline now costs $65 billion? Maybe it's time for state to seize control.

ANALYSIS: Alaska's pipedream to tap the nation's largest natural gas reserves and sell them to the world is now estimated to cost up to $65 billion (plus), according to the newly "aligned" oil companies and a Canadian pipeline builder.

As Mitt Romney and Barack Obama squared off Wednesday night in the first presidential debate, Alaska Gov. Sean Parnell issued a press release announcing that major oil companies had come up with a plan to build a gas pipeline from the state's Arctic oil fields to somewhere in Southcentral Alaska, where the gas would be liquefied and shipped on tankers, perhaps to markets in Asia.

The governor included in his news release an Oct. 1 letter jointly signed by executives from Exxon Mobil Corp., BP, ConocoPhillips and TransCanada Corp., along with some attachments of maps and project goals.

$65 billion project

If you believe that Big Oil is going to build what might amount to a "$65+ billion" Alaska natural gas project when shale gas is booming across the Lower 48, then this may sound like great news. But if you're a skeptic who has been closely following Alaska's quest for a natural gas pipeline project for decades, well, you may doubt this latest news is significant.

At a press conference Thursday, Dan Sullivan, commissioner of the Alaska Department of Natural Resources, didn't go as far as to say that the announcement meant the gas line would be built.

"A project of this size doesn't happen overnight," he said, the understatement of the day.

Since the turn of the century, we've watched estimates for the pipeline inexplicably go from $18 billion to more than $65 billion. Several times we've watched BP, Exxon and Conoco announce big plans to execute their state-issued leases to develop North Slope natural gas. We've also heard folks from these companies privately mock the idea -- the gist being announcing such plans appeases Alaska lawmakers, who increasingly act like desperate middlemen, and calms Alaskans, who grow increasingly antsy about their energy and their economy.

You, the regular Alaskan, are probably confused. You know the gas pipeline is supposed to help our economy, and that construction of a big pipeline could usher in a boom the likes of which we haven't seen in three decades. Some of you make financial decisions based on such announcements. But you don't necessarily stay up to speed on the complex details.

Here's what's going on:

In summer 2008, when Sarah Palin was governor, she persuaded the Alaska Legislature to agree with her plan to offer up to $500 million in state subsidies to Calgary-based pipeline builder TransCanada to pursue a project. The framework was called the Alaska Gasline Inducement Act, or AGIA. The idea was that BP, Exxon and Conoco -- the companies that hold most of the gas leases -- would be forced to tap their reserves if TransCanada could show that a project was viable. Palin wanted to force big oil and gas companies to execute their gas leases, rather than wait on them to build a pipeline, let alone own the pipeline and thus control the flow of gas.

After Palin resigned, Parnell, a former oil lobbyist who was her lieutenant governor, took over. He was elected governor in 2010, and then began his quest to slash the oil tax hikes his former boss spearheaded and to pursue the gas pipeline under AGIA's legal framework. Even before Parnell was governor, BP and Conoco had teamed up for what they called the Denali pipeline project, which they assured us would soon deliver natural gas and not require state subsidies. They soon folded that effort; there wasn't a surplus sale that we noticed.

Jump ahead: Earlier this year, Parnell declared that he was going to get Exxon, BP and Conoco working together, along with TransCanada, and push them to pursue a liquefied natural gas (LNG) pipeline project. Perhaps we could export Alaska's natural gas to Asia, Parnell said, as if this was a new idea. It wasn't. Exporting LNG to Asia has been talked about for decades. In the past, however, big oil companies didn't like it, so some Alaska leaders and folks in the media labeled those LNG supporters wing-nuts.

Then on Wednesday night -- as America tuned into the presidential debate -- the governor released a statement: “I’m encouraged that the companies have made significant progress in advancing a project and an associated schedule for commercializing North Slope gas,” he said in his press release. “Clearly, they have fully shifted their efforts to an Alaska LNG project.”

Maybe. But they’ve also done so in the rest of the world. And all of those other LNG projects have a leg up on Alaska. Those projects were being planned as Alaska was fighting over a pipeline.

Sullivan went over some of that history at Thursday's press conference. He said Alaska has now "clawed its way back to the LNG stage" and that "looking at the rear-view mirror was not the way to seize this opportunity."

Sorting out responsibilities

Who is running the newly aligned partnership to jumpstart construction of a gas pipeline?

Based on a flowchart offered up by these companies in their letter to the governor, it appears Exxon has a heavy role. So does BP. The chart shows all of them at the top, listed as the "Management Team" -- with BP off on its own running the "Commercial Team." Exxon heads up the "Technical Team." Then another layer of duties: BP in charge of "Producing Fields," TransCanada in charge of "Pipelines," Conoco managing the "LNG Plant," and Exxon, again, heading up the "Integration Team."

“Combined, (the components) result in a mega-project of unprecedented scale and challenge; up to 1.7 million tons of steel, a peak construction workforce of up to 15,000, a permanent workforce of more than 1,000, and an estimated total cost in today's dollars of $45 to $65+ billion," executives from all four companies say in their letter to the governor.

Attachments to the letter contain footnotes like, "Descriptions and costs are preliminary in nature and subject to change. Cost range excludes inflation."

Well, the weather can be bad in Alaska, as the oil companies operating in the Arctic know already. And no doubt they need all of the roughnecks they can find to keep the shale boom going in the Lower 48.

And then there are fiscal terms to be dealt with. That boils down to how much would Alaska tax the gas the companies develop. And the oil companies seem to already be suggesting that "fiscal terms" could be a point of contention:

For these reasons, a healthy, long-term oil business, underpinned by a competitive fiscal framework and LNG project fiscal terms that also address AGIA issues, is required to monetize North Slope natural gas resources. The producers look forward to working with the State to secure fiscal terms necessary to support the unprecedented commitments required for a project of this scope and magnitude and bring the benefits of North Slope gas development to Alaska.

Gas taxes and oil taxes are two separate issues. The companies, along with Parnell, have been pushing for a decrease in oil taxes for two years. But the two appear to be inexplicably and perhaps predictably co-mingled in the release. According to one of the charts, the first phase of the project, which would last 12 to 18 months, includes creating a "competitive oil tax environment." It also calls for dealing with "AGIA issues."

Escape the deal?

The one thing that we do know is that as of now -- largely because Alaska is tied to AGIA -- we are dependent on the timetables of the very companies the legislation was supposed to free us from. And as the past has shown us, the oil companies' timetable isn't aligned with Alaska's timetable.

Further, it looks like AGIA concessions are inevitable. So in the end, Alaska might very well end up paying the $500 million to TransCanada, Conoco, BP and Exxon to work on a project under a framework that will later be gutted.

There is an alternative for Alaska: Rather than keeping taxes low and patiently waiting for the companies to build an LNG pipeline, the state could find another way forward -- a risky path but one that keeps Alaska’s options open. The state could get out of AGIA. It could cost more than $1 billion, but if time is money, and timing is everything, sticking with AGIA could in the long run cost far more than that.

We could then act like Exxon, BP and Conoco -- which say "Alaska's North Slope natural gas resources must compete in the global energy markets" -- and explore other options. Maybe we could team up with the Japanese to build the pipeline.

Bottom line: LNG is risky. Parnell has no deal, no agreement with the companies. And now it is clear that BP, Exxon and Conoco are now working together on a shared agenda. We don't know what it is, but history tells us not to count on this "latest development" in the state's quest to land a natural gas pipeline project.